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M&A: The construction boss's view

We’ve made five acquisitions, worth more than £50m combined, over the past three years.

In recent years we’ve grown from £50m turnover to about £350m this year, about £150m of which is down to acquisitions.

You need to find out what the sellers want and understand their motives – do they want to stay, exit and cash out, or even a bit of both?

Then you can make sure there is an alignment of interest between the sellers and the acquirers.

Earn-out mechanisms are good, and they mean that it’s in the interest of the management to keep growing the business and that you both benefit.

Buying good businesses

The courtship period is a minimum of 18 months – it ran for about five years before we bought Foster Property Maintenance last year.

You meet every couple of months and then that’s the sort of time period in which everybody gets comfortable with the idea.

Our strategy is to buy good businesses, not broken businesses. As glib as it sounds, too often companies try to get broken businesses so they get a better deal.

“Our strategy is to buy good businesses, not borken ones - too often companies try and get broken businesses so they get a better deal”

We don’t have loads of exceptional managers who are just sitting on the shelves, so we want to buy businesses with good managers who we can support.

They benefit from our IT, human resources and a dedicated bid team that is successful in public sector procurement, which is something many smaller businesses don’t tend to invest in.

We don’t tend to fundamentally interfere, but instead support them with the things that get in the way of their essential management roles.

Stuart Black is executive chairman of Lakehouse Group

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